Chapter 17: Industrial Supremacy

• Sources of Industrial Growth

1. Industrial Technologies

• Most important tech development was revolutionizing of iron and steel production in late 19th century
• Henry Bessemer and William Kelly had developed simultaneously a process for converting iron into the much more durable and versatile steel

• The process consisted of blowing air into molten iron to burn out the impurities

• Albert S. Hewitt introduced the open-hearth process, which ultimately supplanted the Bessemer process

• Made possible the production of steel in great quantities and large dimensions, for use of locomotives, steel rails, and girders
• Pittsburgh became the center of the steel world. New centers of steel production grew up near Cleveland, Detroit, Chicago, and Birmingham
• Steel industry’s need for lubrication for its machines helped create another important new industry- oil
• Edwin L. Drake established the first oil well near Titusville, Pennsylvania

B The Airplane and the Automobile

• By 1910, the industry had become a major force in the economy, and the automobile was beginning to reshape American social and cultural life
• Wilbur and Orville Wright began to construct a glider that could be propelled through the air by an internal-combustion engine
• Orville made a celebrated test flight near Kitty Hawk, North Carolina
• By the Fall of 1904, they had improved the plane to the point where they were able to fly over 23 miles

C. Research and Development

• Emergence of corporate research and development of laboratories coincided with a decline in government support for research
• There was a growing connection between university-based research and the needs of the industrial economy
• America’s rapid development in the 20th century is in part a product of the market’s success in harnessing knowledge from the academic world and elsewhere

D. The Science of Production

• Taylor urged employers to reorganize the production process by subdividing tasks
• If properly managed by trained experts, Taylor claimed, workers using modern machines could perform simple tasks at much greater speed, significantly increasing productive efficiency
• Most important change in production technology was the emergence of mass production and, above all, the moving assembly line, which Henry Ford introduced in his automotive plants in 1914
• Cut the time for assembling a chassis from twelve and a half hours to one and a half hours
• Enabled Ford to raise wages and reduce the hours of his workers while cutting the price of his Model T from $950 in 1914 to $290 in 1929
• Ford’s assembly line became a standard for many other industries

E. Railroad Expansion

• Chicago was the principle railroad hub of the central U.S., railroads brought livestock, making the city the slaughterhouse of the nation
• Railroad companies agreed to create four time zones across the continent
• Subsidies from federal, state, and local government were vital to these vast undertakings, which required far more capital than private entrepreneurs in America could raise

F. The Corporation

• Under the laws of incorporations, business organizations could raise money by selling stock to members of the public
• Investors had only “limited liability” – that is, they risked only the amount of their investments, they were not liable for any debts the corporation might accumulate beyond that
• In steel Andrew Carnegie had worked his way up from modest beginnings and in 1873 opened up his own steelworks in Pittsburgh
• Ultimately, Carnegie controlled the processing of his steel from mine to market
• In 1901, he sold out for $450 million to the banker J. Piermont Morgan to create the giant United States Steel Corp.- A $1.4 billion enterprise that controlled almost two-thirds of the nation’s steel production

G. Consolidating Corporate America

• “Horizontal Integration”- the combining of a number of firms engaged in the same enterprise into a single corporation
• “Vertical Integration”- the taking over of all the different businesses on which a company relied for its primary function (as in the case of Carnegie Steel)
• Most celebrated corporate empire of the late nineteenth century was John D. Rockefeller’s Standard Oil, a great combination created through both horizontal and vertical integration
• By the 1880s, Rockefeller had established such dominance within the petroleum industry that he served as the leading symbol of monopoly
• Controlled access to 90% of the refined oil in the U.S.

H. The Trust and the Holding Company

• Under a trust agreement, stockholders in individual corporations transferred their stocks to a small group of trustees in exchange for shares in the trust
• Trustees might literally own only a few companies but could exercise effective control over many
• “Holding company”- a central corporate body that would build up the stock of various members of the Standard Oil trust and establish direct, formal ownership of the corporations in the trust
• End of the 19th century, 1% of corporations in America controlled more than 33% of manufacturing
• Industrial giants of the era were responsible for the substantial economic growth
• They were also creating the basis for some of the greatest public controversies of their era

• Capitalism and its Critics

1. The “Self-Made Man”

• “Self-made men.” Andrew Carnegie, John D. Rockefeller and E.H. Harriman
• Most had begun their careers from positions of wealth and privilege
• Industries made large financial contributions to politicians, political parties, and govt. officials exchange for assistance and support

2. Survival pf the Fittest

• Social Darwinism, the application of Charles Darwin’s laws of evolution and natural selection among species to human society
• In human society only the fittest individuals survived and flourished in the marketplace
• Social Darwinism appealed to businessmen because it seemed to legitimize their success and confirm their virtues
• Above all, it appealed to them because it justified their tactics
• Rockefeller’s great Standard Oil monopoly was the clearest example of the effort to free an enterprise from competition

3. The Gospel of Wealth

• Carnegie wrote that the wealthy should consider all revenues in excess of their own needs as “trust funds” to be used for the good of the community
• Horatio Alger was the most famous promoter of the success story and message were invariably the same: A poor boy from a small town went to the big city and he became rich

4. The Problems of Monopoly

• But by the end of the century a growing number of people were becoming deeply concerned about the growth of monopoly
• Blamed monopoly for creating artificially high prices and for producing a highly unstable economy
• Adding to the resentment of monopoly was the emergence of a new class of enormously and conspicuously wealthy people
• Early in the century, 1% of the families in America controlled nearly 88% of the nation’s assets
• Standard of living was rising for everyone, but the gap between rich and poor was increasing

• Industrial Workers in the New Economy

1. The Immigrant Work Force

• Massive migration into industrial cities of two sorts- first was the continuing flow of rural Americans into factory towns and cities, second was the great wave of immigration from Mexico, Canada and above all Europe
• By the end of the century, the major sources of immigration had shifted with large numbers of southern and eastern Europeans (Italians, Poles, Russians, Greeks, Slavs, and others)
• New immigrants were coming to America in part to escape poverty and oppression in their homelands. But they were also lured to the U.S by expectations of new opportunities
• The arrival of these new groups introduced heightened ethnic tensions into the dynamic of the working class.

2. Wages and Working Conditions

• Vulnerable to the boom-and-bust cycle of the industrial economy and because of technological advances
• Many worked in appallingly unsafe or unhealthy factories. Industrial accidents were frequent and severe
• Loss of control, as much as low wages and long hours, lay behind the substantial working- class militancy in the late 19th century

3. Women and Children at Work

• Decreasing need for skilled work in factories induced many employers to increase the use of women and children, whom they could hire for lower wages

D.  The Struggle to Unionize

• Alarming to middle-class Americans was the emergence of the “Molly Macguires”
• Militant labor organization  in the anthracite coal region of PA
• Irish fraternal society that sometimes used terrorist tactics
• Attempted to intimidate coal operators through violence and occasional murder
• Added to growing perception that labor activism was motivated by dangerous radicals

E. The Great Railroad Strike

• The railroad strike of 1877 began when the eastern railroads announced a 10% wage cut
• Strikers disrupted rail service, destroyed equipment, and rioted in the streets of Pittsburgh and other cities
• In all, over 100 people died before the strike finally collapsed several weeks after it had begun
• Great railroad strike was America’s first major, national labor conflict, and it illustrated how disputes could no longer be localized in the increasingly national economy

F. The Knights of Labor

• First major effort to create a genuinely national labor organization was the founding in 1869 of the Knights of Labor
• Membership was open to all who “toiled”, a definition that included all workers and most business and professional people
• The Knights welcomed women
• Loosely organized, without much central direction, championed an eight-hour day and the abolition of child labor

G. The AFL

• American Federation of Labor (AFL), soon became the most important and enduring group in the country
• Federation was an association of essentially autonomous craft unions and represented mainly skilled workers
• “It is so-called competition of the unorganized , defenseless women worker, the girl and the wife, that often tends to reduce the wages of the father and husband,” Samuel Gompers, the most powerful leader of the AFL, once said
• Gompers accepted the basic premise of capitalism; his goal was to simply secure the workers he represented a greater share of capitalism’s material
• The AFL concentrated on the relationship between labor and management
• It supported better wages, hours and working conditions
• Hoped to attain its goals by collective bargaining , but was ready to use strikes if necessary

• Police had been harassing the strikers, and labor and radical leaders called a protest meeting at Haymarket Square
• Police ordered the crowd to disperse, someone threw a bomb that killed seven officers and injured sixty-seven other people
• Police fired into the crowd killing four more people
• Chicago officials rounded up eight anarchists and charged them with murder
• All eight anarchists were found guilty after a remarkably injudicious trial
• Haymarket bombing was an alarming symbol of social chaos and radicalism
• Knights of Labor, which, as the most radical of the major labor organizations, never recovered from the post-Haymarket hysteria

H. The Homestead Act

• By the mid-1880s, the steel industry had organized new production methods that were streamlining the steelmaking process and reducing the companies’ independence on skilled labor
• By 1890, Carnegie and Henry Clay Frick had decided that the Amalgamated “had to go”, even at Homestead
• Over the next two years, the repeatedly cut wages at Homestead
• Finally, Frick announced another wage cut at Homestead, the Amalgamated called for a strike
• Frick abruptly shut down the plant and called in 300 guards from Pinkerton
• Hated Pinkerton’s were well-known strikebreakers
• The Strikers met the guards at the docks with guns and dynamite
•  Three guards and ten strikers were killed and the Pinkerton’s surrendered
• Governor of PA sent the state’s entire National Guard to Homestead
• Public opinion turned against the strikers when a radical made an attempt to assassinate Frick
• Decline was symbolic of the genera erosion of union strength in the late 19th century, as factory labor became increasingly unskilled

I. The Pullman Strike

• In the winter of 1893-1894 the Pullman Company slashed wages by about 25%
• Pullman refused to reduce rents in its model town, workers went on strike and persuaded the militant American Railway Union, led by Eugene V. Debs to support them
• Thousands of railroad workers in 27 states and territories were on strike, and transportation from Chicago to the Pacific coast was paralyzed
• President Grover Cleveland ordered 2,000 troops to the Chicago area
• Federal court issued an injunction forbidding the union to continue the strike
• Debs and his associates defied it and were arrested and imprisoned

     J. Sources of Labor Weakness

• Workers failed to make greater gains for many reasons
• Labor organizations represented only a small percentage of the industrial work force
• AFL excluded unskilled workers, who were emerging as the core of the industrial workforce
• Divisions w/in the work force contributed further to union weakness
• Tensions between different ethnic and racial groups kept laborers divided
• Above all, workers made few gains in the 19th century because of the strength of the forces arrayed against them
• They faced corporate organizations of vast wealth and power
• Corporations had the support of local, state and federal authorities, who were willing to send in troops to “preserve order” and crush labor uprisings on demand
• Workers in the late 19th century failed on the whole to create successful organizations to protect their interests
• In the battle for power w/in emerging industrial economy, almost all the advantages seemed to lie w/ capital